Value Added: Opportunistic Is As Opportunistic Does
Here's Tom Heath's latest column on Washington's entrepreneurial set:
The career of Mark Ordan is an interesting one. He is kind of like Forrest Gump, always bumping into opportunistic situations, or creating them himself. He is part of the Washington entrepreneurial set that sniffs for good opportunities. I am talking about guys like financier Russ Ramsey, former AOL chairman Steve Case, CapitalSource's John Delaney and investor Mark Ein.
Ordan, 49, is part showman, part salesman. He isn't shy. He helped start the Fresh Fields grocery chain and considers himself to a born retailer.
So what is he doing as the new chief executive of Sunrise Senior Living, the publicly owned company that cares for 50,000 seniors every day?
"I thought this was an opportunity to combine everything I've known," Ordan said in a recent phone call. "It's an entrepreneurial company, a big complex company, and it's a very heavily real estate driven company. We are a developer of real estate and we take care of people. If you are a retailer with a background in corporate governance and a background in retailing service and you can be part of a company that has taken a level of service to another dimension, for me it's an opportunity to be partners with great entrepreneur like [Sunrise co-founder] Paul Klaassen."
Part of the rap on Ordan among local business types who will not put their name to their quotes is that he is a deal maker and marketer but not an operations guy. That's partly based on the experience at Fresh Fields, which expanded too fast and sold out to Whole Foods.
"I don't think that's the case," Ordan said. "Everything I have done is operationally intensive. I also surround myself with very good operators. In these kinds of businesses...you recruit top people. I couldn't slice fish and I couldn't cut meat when I was with Fresh Fields. I had no background in the food business. If I was good at anything, I was good at finding talented people and helping them do their jobs."
Ordan wasn't predestined for business. He grew up in Brooklyn, the son of a public school principal. His mother was a school secretary and aunts and uncles were teachers.
"I was the first person in my family to work during July and August," when school was out, he said. After studying ancient philosophy at Vassar College, his consumer electronics hobby led him in 1979 to a job as director of operations for Harvey Electronics, a chain of retail stores based an hour south of the college on Manhattan's west side.
"I love the retail business. This chain was looking for a director of operations. I had to persuade them to take a chance on me. I said pay me what you pay someone out of college, which was about $14,000. But if it works, and if I am really good, then pay me what an industry veteran would get. I said I would leave in six months if I wasn't any good. After six months, they raised me to $30,000. At that point I thought I was rich."
After a year at Harvard Business School, he worked at Goldman Sachs, the gilded investment bank which is as close to a set-for-life job on Wall Street as there is. He worked in the equities department, serving high-net-worth individuals, of which Ordan is now a member in good standing. He also worked in Goldman's real estate deals.
But the retail bug was itching.
Ordan knew a guy named Leo Kahn who had spent his entire career in the supermarket business. Kahn was also an early investor in Staples, the office store chain. Kahn knew Ordan had a love of retailing and urged him to check out a grocery store called Bread & Circus in Newton, Mass.
It was the early 1980s and the store was a novelty. It was a good-for-you, organic grocery store targeted at health-conscious shoppers. It served healthy smoothies, baked fresh bread and had piles of ultra-fresh produce.
Ordan went to Newton, Mass., on a Saturday and the place was absolutely packed. "It seemed so obvious that this was a fabulous idea. Leo was our first investor and we started out with $14 million to open four stores. Kahn put up around $5 million."
Ordan raised the rest. He got money from noted investor Julian Robertson, who ran the Tiger Fund, a hedge fund. Ordan penned a hand-written letter to a fellow he knew at Goldman Sachs, which was starting an early-stage investment fund. Carlyle Group also invested.
Fresh Fields put Howard Schultz, founder of Starbucks on the board and expanded fast. It went from zero to $300 million in revenues in five years. Too fast. Ordan opened 25 stores in five years, invading Chicago, New York and Philadelphia. They started running out of money and made hiring mistakes. Ordan closed a store in Richmond, which was in a bad location.
"We knew we were on to something. But you need to grow at a steady pace. We slowed the growth to get by. You watch costs. More importantly, you get a handle on what is working and what is not working. If you grow too fast, you promote people too quickly."
Ordan sold Fresh Fields to Whole Foods in 1996 for $150 million. Ordan held onto his Whole Foods stock for years. It made him rich.
Not everything has been a success. After Fresh Fields, Ordan briefly started an insurance brokerage. He didn't like it and sold it in a year without losing money.
He was also on the board of Federal Realty Investment Trust, the big developer that was also a landlord to several Fresh Fields stores. He was on the Federal Realty board for 10 years, including five as chairman. By that time, he knew a lot about real estate.
He was recruited in early 2006 by Mills Corp., the shopping mall developer in Chevy Chase, which was struggling with heavy debt and an accounting scandal. Ordan, as chief executive, sold Mills for $7.9 billion, earning a $5 million departure package, a salary of $695,000 and a bonus of $400,000 for a year's work.
"That's where my career took a turn because I learned a lot about corporate governance. Mills was going through a very rough time and had governance issues and was under SEC investigation. So it wasn't a bad idea to hire someone who had chaired a New York Stock Exchange REIT, understood government regulation and understood retailing."
Another Forrest Gump-like moment came on a Sunday morning in 2002, when he was hunting for basil at the Sutton Place Gourmet store on Old Georgetown Road and Democracy Boulevard. He couldn't find the sweet smelling herb, "so I called the investment group in New York and told them their company is going to go out of business if people can't find the basil on a Sunday morning. We stayed in touch and eventually they called and said they wanted to sell the [10-store] company. It wasn't expensive because the chain wasn't dong well."
The main investor was Bear Stearns, the investment house that cratered earlier this summer. Sutton Place was renamed Balducci's a couple of years ago. I asked Ordan if the upscale chain makes money.
"It's a very good company," he said. "As far as I can tell, it's profitable."
So with his big gig at Sunrise, I asked Ordan where he invests his own money.
"I try to invest in areas where I generally think that when things are bad, people panic. When they say housing and banks are in terrible shape, I look at a company like Wachovia that is strong and that is in trouble. It has a solid underpinning and great management."
I pressed him for others. He loves Starbucks. Walmart. Costco. I asked him about Lampert's Sears Holdings. "Jury is out."
"I love real estate. Over any sustained period of time, real estate gains value. You should invest in markets you understand. I know Washington, New York and I know retailing. I don't know St. Louis, but I know Poughkeepsie. Poughkeepsie is 75 miles from New York. It's on a train line, on the shores of the Hudson River. It's gorgeous. It's a great real estate opportunity. I am investing some of Vassar's money in this stuff."
Investor he most respects? Julian Robertson is near the top.
Then I asked him what his biggest investing home run has been.
"I was in E-Bay. I was able to invest early, before it went public. I was part of an investment group. I also invested in Costco when it was still Price Club."
It helps to have friends -- and be in the right place at the right time.
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